Jesse Fried is the Dane Professor of Law at the Harvard Law School. He and Lucian Bebchuk wrote the book, Pay without Performance: the Unfulfilled Promise of Executive Compensation, a critical assessment of corporate governance and executive compensation. A few days ago, he posted a paper that challenges what many, including Nasdaq, regard as an incontrovertible fact - board diversity improves financial performance.
The paper focuses on Nasdaq's proposed board diversity rule. While acknowledging that Nasdaq's proposal may have desirable social effects, Professor Fried challenges Nasdaq for ignoring high-quality academic studies that suggest that board diversity can hurt shareholders. He notes that Nasdaq is well aware of one on the leading studies on board diversity, having cited it in its proposal, but completely ignores the study's bottom line: "the average effect of gender diversity on firm performance is negative". Renee Adams & Daniel Ferreira, Women in the Boardroom and their Impact on Governance and Performance, 94 J. Fin. Econ. 291 (2009). Professor Fried finds that "a fair review of the evidence suggest that Nasdaq's proposal creates real downside risks for investors - risks that Nasdaq does not honestly confront". Professor Fried's paper is available for download here.